hang seng index daily outlook for fri 28 aug limited upside potential below 2247022710 1140592015

(Click to enlarge charts)

What happened earlier

The Hong Kong 40 Index (proxy for the Hang Seng Index) has continued to push higher towards the expected target zone of 22470/22710 during the U.S. session reinforced by better than expected U.S. Q2 GDP and initial jobless claims figures.

Please click on this link for a recap on our previous daily outlook.

Key elements

• Current price action is coming close to the 22470/22710 intermediate resistance zone which is defined by the short-term descending trendline (in red) joining the highs since 11 August 2015 and the 50% Fibonacci retracement of the recent steep decline from 11 August 2015 high @ 9am to 24 August 2015 low @9pm (see 1 hour chart).
• The hourly Stochastic oscillator has started to turn down from its overbought region and still has room for further downside before reaching its extreme oversold level.
• The intermediate support to watch will be at the 21370/21000 zone defined by the gapped up seen yesterday, 27 August 2015 and the “higher low” printed on 26 August 2015 @3pm (see 1 hour chart).

Key levels (1 to 3 days)

Intermediate resistance: 22470

Pivot (key resistance): 22710

Support: 21370 & 21000

Next resistance: 23450 & 24900

Conclusion

The Index is now approaching the short-term risk zone (resistance) of 22470/22710 where a potential decline is expected towards the 21370 support and even 21000 in the short-term.

On the other hand, a clearance above the 22710 daily pivotal resistance is likely to see a probe to test the weekly pivotal resistance at 23450 (the former swing point low printed on 8 July 2015, please click on  this link for more details).  Only a clear break above the 23450 level may trigger a further rally towards the next resistance at 24900 which is the trendline resistance joining the highs of 26 May 2015 and 24 June 2015.

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